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Category Archives: Bitcoin Regulation

Bitcoin traders in Indonesia are protesting what they call excessive capital requirements imposed by the government on cryptocurrency futures trading. The aggrieved brokers say the restrictive law is preventing anyone from participating in the market.

Stifling the Bitcoin Futures Trading Arena

According to The Jakarta Post, the Futures Exchange Supervisory Board (Bappebti) of the Indonesian Trade Ministry issued regulations to govern cryptocurrency futures trading in the country. Among these laws are minimum capital requirements for cryptocurrency futures traders and brokers.

Article 8, paragraph 1 of the regulations stipulate that crypto futures brokerage firms require a minimum paid-up capital of 1 trillion rupiah ($71.7 million). Also, article 24, paragraph 3 of the same set of regulations require Bitcoin futures traders to hold a minimum of 100 billion rupiah ($7.17 million), out of which the law mandates a minimum deposit of 80 billion ruppiah ($5.73 million).

Stakeholders in the industry say the transferred capital requirements far exceed those stipulated for futures trading in mainstream asset classes.

Speaking to Reuters, Oscar Darmawan, the CEO of Indodax, a cryptocurrency exchange platform compared the capital requirements to that of mainstream futures contracts which stands at 2.5 billion rupiah ($179,000).

Back in mid-2018, Bitcoinistreported that Bappebti was legitimizing virtual currencies by classifying them as commodities. While the need to offer consumer protection is legitimate, a 40,000 percent dichotomy in capital requirement for cryptos and mainstream commodities futures trading is seen by industry commentators as excessive.

According to Darmawan, these regulations are counterproductive to the growth of the virtual currency industry. Reports indicate there haven’t been any transactions in the Indonesian cryptocurrency futures trading market to date.

Weekly Bitcoin Trading Volume Reaches New Heights

Meanwhile, BTC trading volume in Indonesia is currently on the rise.

Data from Coin Dance shows that Indonesians traded 102 BTC via Localbitcoins for the week ending February 9, 2019. This figure represents the country’s largest weekly trading volume beating the previous record of 43 BTC set in early October 2016.

In terms of the rupiah, the new weekly BTC trading volume stands at 4.5 billion rupiah. The country’s apex bank banned the use of Bitcoin for payments back in December 2017, but trading cryptos isn’t outlawed.

Do you think the minimum capital requirement imposed on Indonesian BTC futures brokerages is exorbitant? Let us know your thoughts in the comments below.

Delayed Bitcoin ETFs, subpoenas, and blockchain businesses forced to close, Bitcoin regulation in the U.S. is hardly encouraging innovation. If you’re looking for friendly pastures for your cryptocurrency company, avoid these three states at all costs.

1. New York

New York has consistently hit the top of the list for its unsympathetic Bitcoin regulation. Its infamous BitLicense has been called out as “regulatory overreach” by many a key figure in the industry. These include ShapeShift’s Erik Voorhees and Kraken’s Jesse Powell.

Here we are two miles from the Statue of Liberty and you cannot sell CryptoKitties in the state without that license. That’s the absurdity of what’s happened here.

Powell meanwhile spoke out against the former New York Attorney General Eric Schneiderman. He sent Kraken a request for customer information a full three years after the exchange had stopped doing business in New York.

New York’s BitLicence has forced many a crypto company out of the state, highlighting the fact that regulation at a federal level is needed.

Under the stipulations of BitLicence, exchanges have to disclose all information about their entire global client base. This is something not only abhorrent to most customers but also potentially illegal. Other countries have different privacy laws from the United States.

However, a change may be on the horizon. New York’s Governor Andrew Cuomo recently signed a digital currency study bill creating the first cryptocurrency task force in the US. This will comprise technology and blockchain experts, as well as investors and researchers.

The task force’s goal is to promote a healthier cryptocurrency economy while protecting New York investors. Time will tell if it’s a success or yet another case of regulation on steroids.

2. Rhode Island

Rhode Island recently earned a place on this list as one of the worst states for Bitcoin regulation. Senator Sheldon Whitehouse labeled cryptocurrencies as an easy way for “foreign interference” in American elections. He also laid out new tax regulations for virtual currencies.

The new Rhode Island Senate Bill No. 251 is called “An act relating to taxation — sale and use tax–non-collecting retailers, referrers, and retail sale facilitators act.” Apparently, the intention of the bill is to:

Assess sales tax on marketplace facilitations, including those that provide cryptocurrencies used by buyers to pay for services.

In other words? Make doing business a whole lot harder for blockchain businesses in the state. Wall Street veteran and cryptocurrency supporter Caitlin Long was quick to criticize on Twitter.

She said that companies should just leave states that prevent blockchain innovation and strangle research and development:

Long has made headlines lately by helping the Wyoming state to set out clear regulations that welcome and attract blockchain companies. Wyoming has even introduced bills to support cryptocurrencies as legal tender.

This is far from the backward, draconian case of Rhode Island that still associates cryptocurrencies with criminal activity–and Russia.

3. Arizona

Another newcomer to this list, blockchain attorney Drew Hinkes posted yesterday that Arizona had just become the next hostile state when it comes to Bitcoin regulation. Arizona is proposing a bill that imposes sales tax on marketplace facilitators that accept or require virtual currencies, following the lead from Rhode Island.

Commissioner Hester Peirce wants to open the Security Exchange Commission (SEC) to innovation and entrepreneurship. And she calls for a novel and better regulatory framework that is more adaptable to the crypto space.

Commissioner Peirce: SEC to Open the Doors to Innovation

Speaking at an event entitled Protecting the Public While Fostering Innovation and Entrepreneurship: First Principles for Optimal Regulation, at the University of Missouri School of Law, on February 8, 2019, SEC commissioner, Hester Peirce, remarked that the SEC needs to welcome innovation to improve the financial market function and facilitate access to financial markets to all segments of the population.

[W]e regulate an industry that is a key gatekeeper for progress and productivity in the rest of the economy.

Now, the advent of blockchain technology brings a golden opportunity for the SEC to reconsider its approach at handling innovation and entrepreneurship. She explained,

The agency’s opportunity to rethink its approach to innovation also arises out of a decade of technological development related to blockchain and cryptocurrencies. This area has challenged many regulators around the world, and the SEC is certainly no exception. We, along with other regulators, are asking how existing rules apply in this space and whether a new regulatory framework would work better.

Peirce: Decentralization Is at the Root of Our Economic System

Peirce acknowledges that for the SEC, decentralization is particularly challenging because “Blockchain-based networks offer a new way of coordinating human action that does not fit as neatly within our securities framework.” However, she also notes,

Decentralization is nothing new; it is at the root of our economic system; free markets draw on the talents and knowledge of people all across society to produce what society needs.

One of the most critical problems is the fact that the SEC applies securities laws to crypto asset offerings. But when crypto assets are not traded as investment contracts, they are not securities. Thus, according to Peirce, “tokens sold for use in a functioning network, rather than as investment contracts, fall outside the definition of securities.”

In this regard, Peirce worries about the “overly broad” application of the Howey Test, which the Supreme Court designed to determine whether a particular transaction should classify as an investment contract.

According to the Howey Test, to determine whether a blockchain token is indeed a security, the token must meet three specific conditions:

1. An investment of money.
2. In a common enterprise.
3. With an expectation of profits predominantly from the efforts of others.

However, as Peirce points out, not all the blockchain-based projects would be able to pass the Howey Test. And she suggests that Congress might resolve this issue “by simply requiring that at least some digital assets be treated as a separate asset class.”

I look forward to working with you @SECJackson to open the doors to innovation, but we're not a merit regulator issuing seals of approval, so let's encourage investors to do their own work to decide whether an investment is right for them: https://t.co/iMA7NUkLRp

A Florida appeals court has overturned a ruling that acquitted a Localbitcoins trader of money laundering and working as an unlicensed money transmitter.

Bitcoin No Longer ‘Poker Chips’?

As local news outlet Miami Heraldreported January 30, Michell Espinoza, who sold bitcoin worth around $1350 to an undercover police detective in 2014, will now face a jury.

Prosecutors argue Espinoza should have registered as a money transmitter before advertising services on P2P trading platform Localbitcoins. A settlement in 2016 threw out the charges after a judge agreed Bitcoin was not legally money.

“Basically, it’s poker chips that people are willing to buy from you,” a defense witness said in court at the time.

The Third District Court of Appeal, however, has other ideas.

“Espinoza’s bitcoins-for-cash business requires him to register as a payment instrument seller and money transmitter,” the Herald quotes lawmakers as saying Wednesday.

A trial date has not yet materialized.

Setting A Precedent

Espinoza’s case was complicated by the fact that the undercover officer told him he planned to use the bitcoins to buy hacked data.

Nonetheless, the implications of a potential successful conviction are significant. The case could allow law enforcement to prosecute more Localbitcoins traders if there is a reason to suspect they are engaging in “business” and not sales of “private” bitcoin holdings.

The U.S. has strived to enshrine obligations surrounding taxation and securities in law for cryptocurrency issuers and holders, but the national landscape remains patchwork.

As Bitcoinist reported, individual states have taken markedly different approaches to cryptocurrency, ranging from openly accepting to openly hostile.

Such is the headache for some businesses looking to serve the US market, exchanges including Bittrex and Coinbase have opted to segregate their domestic and non-domestic audiences by setting up entirely separate platforms.

In December, a bipartisan bill appeared in Congress aiming to exempt cryptocurrencies from securities law.

What do you think about the Miami appeals court’s decision? Let us know in the comments below!

Iran has lifted the ban on Bitcoin and cryptocurrency as it takes another step towards its own sovereign cryptocurrency amid talks with foreign nations as potential partners.

Iran Unbans Bitcoin, ICOs

Today, Iran’s central bank has released an early draft of its cryptocurrency laws, lifting the previous ban on Bitcoin, cryptocurrencies, digital tokens, and ICOs, reports to Al Jazeera.

Nevertheless, the regulations will impose restrictions on the use of virtual currencies inside the country. Thus, individuals will be allowed to have bitcoin, though banks and businesses will likely be prohibited from transacting in cryptocurrency to preserve the rial monopoly.

The document also formally recognizes cryptocurrency wallets and exchanges as well as mining to generate cryptocurrencies through computing power.

‘Crypto-Rial’ Talks Underway

According to the Tehran Times, Iran is currently in negotiations with eight foreign nations as part of efforts to incorporate cryptocurrency payments into international payment transactions. This move comes as the country looks for ways to counter US-led economic blockade.

Commenting on the plan, Mohammad Reza Modoudi, the acting head of the country’s Trade Promotion Organization (TPO), said:

Representatives from Switzerland, South Africa, France, England, Russia, Austria, Germany, and Bosnia have visited Iran to hold related talks about the issue.

Establishing crypto-based trade deals with other countries will likely be a massive step for Iran after the SWIFT ban. Furthermore, reports indicate that Russia, one of the eight countries previously mentioned is also exploring the creation of financial systems that do not depend on the SWIFT network.

According to Al Jazeera, Iran already has a trilateral agreement with Russia and Armenia that involves the use of blockchain technology. Commenting on the deal, Yuri Pripachkin, a senior Russian government official said:

According to our information, an active development of an Iranian version of SWIFT is currently under way.

Iran Serious About State-Backed Cryptocurrency

This week, reports also emerged that the country was set to move forward with its plans to create a state-backed cryptocurrency. Sources say the unveiling of the national virtual currency will be part of the activities during the annual Electronic Banking and Payment Systems, which kicked off today.

Presently, there is no indication of whether the proposed national cryptocurrency will act as a facilitator of trade between Iran and other countries. For now, any ‘crypto-rial’ will be used to execute payments between banks and institutions invested in cryptocurrencies.

What do you think about Iran’s plans to engage with other countries to use its national cryptocurrency? Let us know your thoughts in the comments below.

A house bill for amending the currently existing taxation Code of Indiana has been filed January 24 seeking acceptance of cryptocurrencies for paying taxes. Another bill requiring the state treasurer of New Hampshire to develop an implementation plan for accepting cryptocurrencies for tax payments has also been filed.

Pay Taxes With Cryptocurrencies in Indiana

House bill number 1683 filed January 24th, asks the General Assembly of the State of Indiana to amend the current taxation Code of Indiana.

Be it enacted, the bill may approve the usage of one or more virtual currencies to pay taxes, penalties, interests, costs, special assessments, or any other liabilities which are imposed under the bill.

According to the document, a county treasurer

shall determine the value of the payment in United States dollars at the time the payment is made by using the applicable exchange rate.

If the bill is approved by the General Assembly of Indiana, it will be in effect from July 1st, 2019.

New Hampshire on a Similar Path

In the state of New Hampshire, House bill number 470-FN, filed January 5th, 2019, seeks the acceptance of cryptocurrencies as payment for taxes and fees by state agencies.

If the bill is enacted by the Senate and House of Representatives in General Court, it will require the state treasurer, in consultation with other state officials, to develop an implementation plan for the state to begin accepting cryptocurrencies as payments for fees and taxes starting July 1st, 2020.

The plan is also supposed to identify an appropriate third party payment processor. As per the documents, the payment processor should facilitate transactions at no cost to the state.

The plan should be submitted by the state treasurer on or before November 1st.

The bill will allow the state agencies to accept cryptocurrency payments but it doesn’t obligate them to do so, inferring that approval might be necessary.

Florida’s Seminole County became the first US locality to accept Bitcoin for taxes in May 2018. Later in November, Ohia also began accepting Bitcoin for taxes.

What do you think of paying taxes with cryptocurrencies? Don’t hesitate to let us know in the comments below!

Owning bitcoin in South Africa just got a little harder, or at least it will do by the end of quarter one this year. According to a consultation paper published yesterday by the South African Reserve Bank (SARB), some hefty new regulation surrounding and exchanges and ATMs is about to be enforced.

South African Regulators Are Cracking Down on Bitcoin

The paper points to the several problems that cryptocurrencies present that spur the need to develop a proper regulatory response. Among these, it states that crypto assets may have a serious impact on the financial sector in the country. And that they present too many opportunities for “regulatory arbitrage.” Furthermore:

Crypto assets do not fit neatly within the current regulatory framework

This means, they argue, that they must draft new legislation, particularly at a time of growing interest from the public.

Currently, none of the consultation paper’s proposed approaches to regulating Bitcoin 00 have been enforced. The paper is still open to public comment until Feb 15.

The Intergovernmental FinTech Working Group (IFWG)

The IFWG formed a group to create this consultation paper. The group, called the Crypto Assets Regulatory Working Group, includes members from the SARB and the Treasury. Its aim is to forge a way forward for the regulation of cryptocurrency in South Africa.

Traditional financial institutions and the country’s Reserve bank are laying the way forward for crypto’s future here. It’s hardly surprising then, that owning bitcoin in South Africa is about to get a whole lot harder.

Within the paper, the group acknowledges the possible advantages of cryptocurrency within the South African market, such as:

Customers purchasing crypto assets could seek to diversify their investment portfolio to an asset class that is not necessarily related to specific country risk.

However, the paper weighs more heavily on the problems of leaving cryptocurrency unregulated. This is hardly surprising when you consider the members that comprise the group.

Although the potential benefits of crypto assets that are related to lower transactional costs, greater speed and enhanced security of transactions are often touted, actual use cases thus far are yet to demonstrate that crypto assets payments are consistently faster, safer and cheaper than existing options.

Moreover, they go on to reiterate the ease with which Bitcoin can assist in criminal activities such as money laundering. They would. These are bankers after all.

Bitcoin-ing in South Africa Will Get Harder by End of Q1

The paper is currently in a draft version and nothing is set in stone yet, however:

The regulatory authorities will specify the way forward through a policy instrument such as a guidance note or position paper aimed for the first quarter of 2019.

The Crypto Assets Regulatory Working Group believes that regulation should not be delayed any further and that a clear approach is necessary.

Some of the main actions that will be taken are regarding the monitoring of cryptocurrency transactions.

This will focus heavily on AML/KYC and ensure that cryptocurrency exchanges, custodial services, and Bitcoin ATMs comply with existing South African financial security legislation.

They will also need to register with the IFWG and comply with AML/CFT (combating the financing of terrorism) conditions of the Financial Intelligence Centre Act.

Moreover, service providers will need to monitor user transactions, particularly large ones that may signal terrorist activity. Any service providers that fail to comply with these requirements will have sanctions imposed upon them.

The Office of Compliance Inspections and Examinations (OCIE) of the United States Securities and Exchange Commission (SEC) listed the cryptocurrency market as one of the six focus points of its compliance monitoring activities for 2019.

Spotlight on the Cryptocurrency Market

According to a report titled “2019 Examination Priorities,” OCIE says it plans to shine the spotlight on the goings-on in the cryptocurrency. An excerpt from the report relating to cryptocurrencies reads:

Given the significant growth and risks presented in this [the crypto] market, OCIE will continue to monitor the offer and sale, trading, and management of digital assets, and where the products are securities, examine for regulatory compliance. In particular, through high-level inquiries, OCIE will take steps to identify market participants offering, selling, trading, and managing these products or considering or actively seeking to offer these products and then assess the extent of their activities.

To this end, the OCIE plans to examine the activities of firms operating in the digital asset market. This examination will cover sale, trading, as well as the management of cryptocurrency assets. The OCIE also plans to pay particular attention to cryptos deemed to be securities.

Commenting on the approach for 2019, Pete Driscoll, Director of the OCIE, said:

OCIE is steadfast in its commitment to protect investors, ensure market integrity and support responsible capital formation through risk-focused strategies that improve compliance, prevent fraud, monitor risk, and inform policy.

Identifying the virtual currency market as a priority isn’t a new development for the OCIE. Back in 2018, the emerging market also formed part of the OCIE’s agenda. However, the mandate for 2019 appears to be an extension of the goal for last year, which focused primarily on risk and security.

Too Much Regulation?

The expansion of OCIE’s focus on digital assets comes at a time when U.S. Federal Lawmakers are trying to establish a separate regulatory ambit for cryptocurrencies. Some commentators feel the SEC is over-regulating the industry, slowing the rate of innovation in the country with regard to digital assets.

In December 2018, Reutersreported that members of the GOP were frustrated with the leadership of the SEC over their stance on most ICOs being securities. This new report from the OCIE expanding its examination focus might exacerbate such concerns. Meanwhile, for the SEC, the Commission continues to state that strict laws create a safer marketplace.

What do you think about the SEC’s focus on cryptocurrency in 2019? Let us know your thoughts in the comments below!

Reports on social media indicate that banks in India are threatening customers that deal in Bitcoin and other cryptocurrencies with the closure of their accounts. This move is the latest salvo from the banking industry in a country where cryptos seem all but banned.

Upping the Ante

On Friday (Jan. 11, 2019), Morgan Creek founder and partner, Anthony Pompliano published a tweet culled from sources in India about the latest move by banks in India to prevent Bitcoin trading. According to the tweet, banks sent out warnings telling their customers not to deal in cryptos or risk the closure of their account.

Banks in India are now saying they will now close customers' accounts if they deal in cryptocurrencies.

These legacy institutions fear what they can't control, but people should be allowed to do whatever they want with their wealth.

The notice even declared that banks need not send any further correspondence before closing customer accounts. Pomp’s tweet came directly from another Twitter user; Indian CryptoGirl, who commented on the situation saying:

Indian Banks now forcefully taking permission from us to ‘reserve right to close our account without further intimation’ if we deal in #cryptocurrency transactions Ability to decide what to do with our own money is the very reason we need to invest, #BUIDL, & believe in #bitcoin.

There are also reports of similar messages on ATM screens belonging to Kotak Mahindra Bank. According to Indian CryptoGirl, the bank has even made good on its threat. In an update of the situation posted on Saturday (Jan. 12, 2019), the bank issued a notice of account closure for doing transactions involving cryptocurrencies.

"We noticed you did a transaction involving crypto, hence, we will close your account within 30 days"

Bitcoin all but Banned

Unsurprisingly, the reaction on social media has been one of outrage with many saying Bitcoin is all but banned in India. In 2018, the Reserve Bank of India (RBI); the country’s apex bank,prohibited banks from facilitating cryptocurrency transactions.

A coalition of stakeholders challenged the decision, and the matter remains unresolved. The government failed to respond to a Supreme Court deadline back in October 2018. Reports are indicating a plan to establish regulatory clarity for the market.

However, before such regulations emerge, the legacy banking system in India continues to stifle avenues for cryptocurrency trading. With the government failing to provide a definite stance on cryptos, the RBI ban remains the de facto regulation in the country.

What do you think about this latest move by Indian banks; legitimate concerns or fear of being usurped by decentralized currency systems? Let us know your thoughts in the comments below.

India’s long-running saga regarding the legality of cryptocurrency is likely to see a lifting of the current ban in 2019.

Indian Flip Flops

Reports suggest the Gov’t formed committee debating the matter are in favor of legalization, although with strong regulations.

India was a notable early adopter of Bitcoin, prompting the Reserve Bank of India (RBI) to issue its first cryptocurrency warning way back in December 2013. But Indians continued to embrace cryptocurrency with a fervor matched only by RBIs increasing animosity towards it.

Despite this, it is interesting to note that RBI was considering its own fiat-cryptocurrency, the Lakshmi, back in September 2017. In the end, though, it seems that the bank considered a ban to be a better solution.

But Who Banned What Exactly?

In April this year, RBI ordered financial institutions to stop providing services to businesses involved with cryptocurrency. Companies were given a three month grace period, so the ban came into force on July 5.

However, though the central bank’s position on the matter was made fairly explicit, the government’s position seemed increasingly at odds with this. Reports stated that the Indian government had no intention to enforce a blanket ban on cryptocurrency.

Ongoing Confusion

Lawyers for industry players are locked in an ongoing legal battle to repeal the RBI ban, which was allegedly implemented without any research being conducted.

RBI Headquarters in Mumbai

The government has been deliberating its final decision, suggesting that it may reach some conclusion before the end of the year. Meanwhile, the Supreme Court gave the government a two-week deadline to provide some clarity back in October – which it missed.

The government’s own suggested resolution date has again slipped back, and this latest report suggests the committee’s recommendations will come in February 2019 (a further delay).

When Clarity Comes

Companies are queuing up to (re)enter the Indian market if the ban does finally get lifted.

This includes social media giant, Facebook, which is supposedly working on a stable coin for WhatsApp. The initial focus of this venture is said to be the remittances market in India.

Will India eventually lift its ban on cryptocurrency? Share your thoughts below!